HERNDON, VA., November 3, 2016 -- ePlus inc. (NASDAQ NGS: PLUS - news), a leading provider of technology solutions, today announced financial results for the three and six months ended September 30, 2016.

Management Comment

“Our strong fiscal second quarter and year-to-date performance was driven by the effective execution of our long-term strategy to grow organically and through acquisitions, serve the current needs of our expanding customer base, and continue to invest in the development of new solutions to capture future opportunities,” said Mark P. Marron, Chief Executive Officer and President of ePlus inc. “We are particularly pleased by the double digit growth in both net sales and in adjusted gross billings of products and services, and by the 80 basis points of gross margin expansion on sales of product and services achieved in the second quarter. Our quarterly gross margin performance reflects an increase in gross profit from products and services and continued strong sales of third party maintenance and software assurance contracts.”

“While our end markets continue to be very competitive, we remain committed to our strategy to achieve long term growth. Steady investment in our solution sets such as Cloud Aggregated Services and hyperconverged solutions provides us with a solid platform for long-term organic growth through both new customer acquisition and expanding the percentage of IT spend we capture at our existing customers.”

Second Quarter Fiscal 2017 Results

For the second quarter ended September 30, 2016 as compared to the second quarter of the prior fiscal year ended September 30, 2015:

During the second quarter of fiscal 2017, we received $0.4 million related to the dynamic random access memory (“DRAM”) class action lawsuit, which claimed that manufacturers fixed the price for DRAM (a memory part that is sold as part of electronic devices), which was included in other income.

Net earnings rose 7.0% to $16.8 million, inclusive of non-operating income of $0.4 million relating to the Company’s claim in the class action lawsuit mentioned above.

Adjusted EBITDA rose 7.4% to $29.9 million, from $27.9 million.

Diluted earnings per share was $2.42, compared with $2.15 in the second quarter of fiscal 2016. Non-GAAP diluted earnings per share was $2.47, compared with $2.19 last year. Non-GAAP diluted earnings per share is based on net earnings calculated in accordance with GAAP, adjusted to exclude other income and acquisition related amortization expense, net of taxes and a tax benefit of $0.1 million recognized in the current quarter, related to the adoption of the share-based compensation accounting standard.

First Half Fiscal 2017 Results

For the six months ended September 30, 2016 as compared to the six months ended September 30, 2015:

During the second quarter of fiscal 2017, we received $0.4 million related to the DRAM class action lawsuit, which claimed that manufacturers fixed the price for DRAM (a memory part that is sold as part of electronic devices).

Net earnings rose 12.1% to $27.4 million, inclusive of non-operating income of $0.4 million relating to the Company’s claim in the class action lawsuit mentioned above. Our effective tax rate for the first half of fiscal 2017 was 40.4%, which includes a tax benefit of $0.5 million, or $0.07 per diluted share, related to the adoption of the new share-based compensation accounting standard.

Adjusted EBITDA rose 11.4% to $49.2 million, from $44.1 million.

Diluted earnings per share was $3.91, compared with $3.35 in the first half of fiscal 2016. Non-GAAP diluted earnings per share was $4.00, compared with $3.44 last year. Non-GAAP diluted earnings per share is based on net earnings calculated in accordance with GAAP, adjusted to exclude other income and acquisition related amortization expense, net of taxes and the tax benefit of $0.5 million recognized in fiscal 2017.

Balance Sheet Highlights

As of September 30, 2016, ePlus had cash and cash equivalents of $48.0 million, compared with $94.8 million as of March 31, 2016. The decrease is primarily the result of investments made in our financing portfolio, working capital required for the growth in our technology segment, an increase in committed inventory to $80.5 million, and 328,481 shares bought under our share repurchase plan. Our cash conversion cycle remained consistent with prior periods. Total stockholders' equity was $319.7 million and total shares outstanding were 7.1 million, compared with $318.9 million and shares outstanding of 7.4 million on March 31, 2016.

Summary and Outlook

“Our continued investment in growing customer facing headcount, increasing our services offerings and capabilities, and delivering advanced technology solutions are particularly valuable in our efforts to penetrate the Fortune 500. We have diverse solutions offerings which target the most critical IT needs of our customers, a strong balance sheet, and a competitive, entrepreneurial culture which helps drive results. While overall industry growth continues to remain modest, based on our financial position, operational expertise and growing customer base, we believe we are well positioned to grow ahead of the overall market in 2017,” Mr. Marron continued.

Results of Operations – Three Months Ended September 30, 2016

The Company's operations are conducted through two business segments. The technology segment includes sales of information technology products, third-party software, third-party maintenance contracts, advanced professional services and managed services, and the Company's proprietary software to commercial entities and state and local governments. The financing segment consists of the financing of equipment, software, and related services to commercial entities, state and local governments, and federal government contractors.

Technology Segment

The results of operations for the technology segment for the three months ended September 30, 2016 and 2015 were as follows (dollars in thousands):

Three Months Ended September 30,

2016

2015

Change

Sales of product and services

$

361,227

$

324,259

$

36,968

11.4

%

Fee and other income

1,488

1,721

(233

)

(13.5

%)

Net sales

362,715

325,980

36,735

11.3

%

Cost of sales, product and services

288,204

261,208

26,996

10.3

%

Gross profit

74,511

64,772

9,739

15.0

%

Professional and other fees

1,425

1,305

120

9.2

%

Salaries and benefits

40,182

33,476

6,706

20.0

%

General and administrative

6,695

6,126

569

9.3

%

Depreciation and amortization

1,721

1,196

525

43.9

%

Interest and financing costs

-

22

(22

)

(100.0

%)

Operating expenses

50,023

42,125

7,898

18.7

%

Operating income

$

24,488

$

22,647

$

1,841

8.1

%

Adjusted EBITDA

$

26,209

$

23,843

$

2,366

9.9

%

Net sales rose 11.3% to $362.7 million, from $326.0 million in the second quarter of fiscal 2016.

Adjusted gross billings of products and services grew 13.0% to $487.3 million, from $431.1 million in the second quarter of fiscal 2016. The increase in net sales and adjusted gross billings of products and services was a result of an increase in demand for products and services from our largest corporate customers.

Gross margin on sales of product and services was 20.2%, up from 19.4% in the second quarter of fiscal 2016. The increase in gross margin was due to shifts in our product revenue mix as we sold products with higher margins and a higher proportion of third party software assurance, maintenance and services, which are presented on a net basis, and an increase in gross profit from services.

Operating expenses rose 18.7% to $50.0 million, from $42.1 million in the second quarter of fiscal 2016, reflecting increased amortization expenses associated with the acquisition of IGX in December 2015 and increased salaries and benefits due to increased variable compensation and a 10.8% increase in personnel to 1,047 from 945. The position additions included 95 sales and engineering positions due to internal growth and the acquisition of IGX, with the remaining additions being administrative hires.

Segment operating income was $24.5 million, up 8.1% from $22.6 million in the second quarter of fiscal 2016. Adjusted EBITDA increased 9.9% to $26.2 million for the quarter, from $23.8 million in the second quarter of fiscal 2016.

Financing Segment

The results of operations for the financing segment for the three months ended September 30, 2016 and 2015 were as follows (dollars in thousands):

Three Months Ended September 30,

2016

2015

Change

Financing revenue

$

8,722

$

10,279

$

(1,557

)

(15.1

%)

Fee and other income

25

27

(2

)

(7.4

%)

Net sales

8,747

10,306

(1,559

)

(15.1

%)

Direct lease costs

1,325

3,157

(1,832

)

(58.0

%)

Gross profit

7,422

7,149

273

3.8

%

Professional and other fees

310

208

102

49.0

%

Salaries and benefits

2,114

2,264

(150

)

(6.6

%)

General and administrative

881

259

622

240.2

%

Depreciation and amortization

2

4

(2

)

(50.0

%)

Interest and financing costs

400

400

-

-

Operating expenses

3,707

3,135

572

18.2

%

Operating income

$

3,715

$

4,014

$

(299

)

(7.4

%)

Adjusted EBITDA

$

3,717

$

4,018

$

(301

)

(7.5

%)

Net sales were $8.7 million, compared with $10.3 million in the second quarter of fiscal 2016, as a result of lower portfolio earnings and transactional gains, which was offset by higher post-contract earnings. Direct lease costs decreased $1.8 million or 58.0% due to a lower depreciation expense from operating leases.

Operating expenses were up 18.2% over the previous year period, mainly due to higher reserve for credit losses necessitated by an expansion of the financing portfolio. Segment operating income and adjusted EBITDA both decreased to $3.7 million from $4.0 million in the second quarter of fiscal 2016.

Results of Operations – Six Months Ended September 30, 2016

Technology Segment

The results of operations for the technology segment for the six months ended September 30, 2016 and 2015 were as follows (dollars in thousands):

Six Months Ended September 30,

2016

2015

Change

Sales of product and services

$

651,408

$

583,955

$

67,453

11.6

%

Fee and other income

2,764

3,532

(768

)

(21.7

%)

Net sales

654,172

587,487

66,685

11.4

%

Cost of sales, product and services

518,051

468,926

49,125

10.5

%

Gross profit

136,121

118,561

17,560

14.8

%

Professional and other fees

2,922

2,567

335

13.8

%

Salaries and benefits

77,667

66,428

11,239

16.9

%

General and administrative

12,926

11,451

1,475

12.9

%

Depreciation and amortization

3,492

2,400

1,092

45.5

%

Interest and financing costs

-

41

(41

)

(100.0

%)

Operating expenses

97,007

82,887

14,120

17.0

%

Operating Income

$

39,114

$

35,674

$

3,440

9.6

%

Adjusted EBITDA

$

42,606

$

38,074

$

4,532

11.9

%

Net sales rose 11.4% to $654.2 million, from $587.5 million in the first half of fiscal 2016.

Adjusted gross billings grew 15.9% to $884.8 million, from $763.4 million in the first half of fiscal 2016. The increase in net sales and adjusted gross billings of products and services was a result of an increase in demand for products and services from our largest corporate and SLED customers.

Gross margin on sales of product and services was 20.5%, up from 19.7% in the first half of fiscal 2016. The increase in gross margin was due to shifts in our product revenue mix as we sold a higher proportion of third party software assurance, maintenance and services, which are presented on a net basis.

Operating expenses rose 17.0% to $97.0 million, from $82.9 million in the first half of fiscal 2016, reflecting increased amortization expenses associated with the acquisition of IGX in December 2015 and increased salaries and benefits due to increased variable compensation and a 10.8% increase in personnel to 1,047 from 945.

Segment operating income was $39.1 million, up 9.6% from $35.7 million in the first half of fiscal 2016. Adjusted EBITDA increased 11.9% to $42.6 million, from $38.1 million in the first half of fiscal 2016.

The Company maintained its balanced portfolio of customer-end markets. The breakdown of net sales by customer-end market for the twelve months ended September 30, 2016 and 2015 were as follows:

Twelve Months Ended September 30,

2016

2015

Change

Technology

23

%

21

%

2

%

State & Local Government & Educational Institutions

22

%

23

%

(1

%)

Telecom, Media, and Entertainment

15

%

17

%

(2

%)

Financial Services

12

%

10

%

2

%

Healthcare

10

%

10

%

-

Other

18

%

19

%

(1

%)

Total

100

%

100

%

Financing Segment

The results of operations for the financing segment for the six months ended September 30, 2016 and 2015 were as follows (dollars in thousands):

Six Months Ended September 30,

2016

2015

Change

Financing revenue

$

15,709

$

18,625

$

(2,916

)

(15.7

%)

Fee and other income

84

40

44

110.0

%

Net sales

15,793

18,665

(2,872

)

(15.4

%)

Direct lease costs

2,317

6,175

(3,858

)

(62.5

%)

Gross profit

13,476

12,490

986

7.9

%

Professional and other fees

599

464

135

29.1

%

Salaries and benefits

4,427

4,526

(99

)

(2.2

%)

General and administrative

1,120

505

615

121.8

%

Depreciation and amortization

6

8

(2

)

(25.0

%)

Interest and financing costs

749

934

(185

)

(19.8

%)

Operating expenses

6,901

6,437

464

7.2

%

Operating income

$

6,575

$

6,053

$

522

8.6

%

Adjusted EBITDA

$

6,581

$

6,061

$

520

8.6

%

Net sales were $15.8 million, compared with $18.7 million in the first half of fiscal 2016, as a result of lower portfolio earnings and transactional gains, which was offset by higher post-contract earnings. Direct lease costs decreased $3.9 million or 62.5% due to a lower depreciation expense from operating leases.

Operating expenses were up 7.2% over the previous year, mainly due to higher reserve for credit losses, offset by lower interest expenses. Segment operating income and adjusted EBITDA both increased to $6.6 million from $6.1 million in the first half of fiscal 2016.

Recent Corporate Developments

On October 18, 2016, ePlus announced the addition of its Cloud Aggregated Services, a new suite of cloud services from the company that addresses changing market trends in customer experience and engagement models.

On October 11, 2016, ePlus announced that businesses which need secure WAN transport for cloud environments and branch locations can tap ePlus’ new Intelligent Branch solution, which is ideal for organizations with 10 or more branches.

On October 4, 2016, ePlus announced its Business Transformation group, which is charged with the design and development of ePlus-branded solutions that address current business challenges and fast moving, emerging technologies.

On August 19, 2016, ePlus announced that its board of directors has authorized the Company to repurchase up to 500,000 shares of ePlus outstanding common stock over a 12-month period commencing August 19, 2016.

On August 9, 2016, ePlus announced that it has extended its Managed Services platform with an upgraded dashboard, featuring new functionality that provides global trending data, mapping and managed data aggregation.

Conference Call Information

ePlus will hold a conference call and webcast at 4:30 p.m. ET on November 3, 2016:

The replay of this webcast will be available approximately two hours after the call and be available through November 11, 2016.

About ePlus inc.

ePlus is a leading integrator of technology solutions. ePlus enables organizations to optimize their IT infrastructure and supply chain processes by delivering complex information technology solutions, which may include managed and professional services and products from top manufacturers, flexible financing, and proprietary software. Founded in 1990, ePlus has more than 1,000 associates serving commercial, state, municipal, and education customers nationally and in the UK. The Company is headquartered in Herndon, VA. For more information, visit http://www.eplus.com/, call 888-482-1122, or email info@eplus.com. Connect with ePlus on Facebook at www.facebook.com/ePlusinc and on Twitter at www.twitter.com/ePlus.

ePlus® and ePlus products referenced herein are either registered trademarks or trademarks of ePlus inc. in the United States and/or other countries. The names of other companies and products mentioned herein may be the trademarks of their respective owners.

Forward-looking statements

Statements in this press release that are not historical facts may be deemed to be "forward-looking statements." Actual and anticipated future results may vary materially due to certain risks and uncertainties, including, without limitation, possible adverse effects resulting from financial market disruption and fluctuations in foreign currency rates, and general slowdown of the U.S. economy such as our current and potential customers' delaying or reducing technology purchases or put downward pressure on prices, increasing credit risk associated with our customers and vendors, reduction of vendor incentive programs, the possibility of additional goodwill impairment charges, and restrictions on our access to capital necessary to fund our operations; significant adverse changes in, reductions in, or losses of relationships with major customers or vendors; our ability to implement comprehensive plans to achieve customer account coverage, cost containment, asset rationalization, systems integration and other key strategies; our ability to secure our electronic and other confidential information or that of our customers or partners; changes to our senior management team and/or failure to implement succession plans; the demand for and acceptance of, our products and services; our ability to adapt our services to meet changes in market developments; our ability to adapt to changes in the IT industry and/or rapid change in product standards; our ability to hire and retain sufficient personnel; our ability to realize our investment in leased equipment; our ability to consummate and integrate acquisitions; the creditworthiness of our customers; our ability to raise capital and obtain non-recourse financing for our transactions; our ability to reserve adequately for credit losses; the impact of competition in our markets; the possibility of defects in our products or catalog content data; and other risks or uncertainties detailed in our reports filed with the Securities and Exchange Commission. All information set forth in this press release is current as of the date of this release and ePlus undertakes no duty or obligation to update this information.

We included reconciliations below for the following non-GAAP information: (i) Adjusted Gross Billings of Product and Services, (ii) Adjusted EBITDA, (iii) Adjusted EBITDA Margin and (iv) non-GAAP Net Earnings per Common Share - Diluted. We define adjusted gross billings of product and services as our sales of product and services calculated in accordance with GAAP, adjusted to exclude the costs incurred related to sales of third-party software assurance, maintenance and services. We define Adjusted EBITDA as net earnings calculated in accordance with GAAP, adjusted for the following: interest expense, depreciation and amortization, provision for income taxes, and other income. We consider the interest on notes payable from our financing segment and depreciation expense presented within cost of sales, which includes depreciation on assets financed as operating leases, to be operating expenses. Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net sales. Non-GAAP net earnings per common share are based on net earnings calculated in accordance with GAAP, adjusted to exclude other income and acquisition related amortization expense, and the related effects on income taxes.

Our use of non-GAAP information as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP. In addition, other companies, including companies in our industry, might calculate similar non-GAAP Adjusted Gross Billings, Adjusted EBITDA, and non-GAAP Net Earnings per Common Share - Diluted or similarly titled measures differently, which may reduce their usefulness as comparative measures.

Three Months Ended September 30,

Six Months Ended September 30,

2016

2015

2016

2015

(amounts in thousands)

GAAP: Sales of product and services

$

361,227

$

324,259

$

651,408

$

583,955

Plus: Costs incurred related to sales of

third party software assurance,

126,081

106,837

233,373

179,449

maintenance and services

Non-GAAP adjusted gross billings of

$

487,308

$

431,096

$

884,781

$

763,404

product and services

Three Months Ended September 30,

Six Months Ended September 30,

2016

2015

2016

2015

(amounts in thousands)

GAAP: Net earnings

$

16,775

$

15,679

$

27,446

$

24,493

Plus: Provision for income taxes

11,808

10,982

18,623

17,234

Plus: Depreciation and amortization [1]

1,723

1,200

3,498

2,408

Less: Other income [2]

(380

)

-

(380

)

-

Non-GAAP: Adjusted EBITDA

$

29,926

$

27,861

$

49,187

$

44,135

Non-GAAP: Adjusted EBITDA margin

8.1

%

8.3

%

7.3

%

7.3

%

Three Months Ended September 30,

Six Months Ended September 30,

2016

2015

2016

2015

(amounts in thousands)

Technology Segment

Operating income

$

24,488

$

22,647

$

39,114

$

35,674

Plus: Depreciation and amortization [1]

1,721

1,196

3,492

2,400

Adjusted EBITDA

$

26,209

$

23,843

$

42,606

$

38,074

Financing Segment

Operating income

$

3,715

$

4,014

$

6,575

$

6,053

Plus: Depreciation and amortization [1]

2

4

6

8

Adjusted EBITDA

$

3,717

$

4.02

$

6,581

$

6,061

Three Months Ended September 30,

Six Months Ended September 30,

2016

2015

2016

2015

(amounts in thousands, except per share data)

GAAP: Earnings before provision for income taxes

$

28,583

$

26,661

$

46,069

$

41,727

Plus: Acquisition related amortization expense [3]

974

545

2,063

1,113

Less: Other income [2]

(380

)

-

(380

)

-

Non-GAAP: Earnings before provision for income taxes

29,177

27,206

47,752

42,840

Non-GAAP: Provision for income taxes [4]

12,047

11,206

19,663

17,694

Non-GAAP: Net earnings

$

17,130

$

16,000

$

28,089

$

25,146

GAAP net earnings per common share – diluted

$

2.42

$

2.15

$

3.91

$

3.35

Non-GAAP net earnings per common share – diluted

$

2.47

$

2.19

$

4.00

$

3.44

[1] Amount consists of depreciation and amortization for assets used internally.

[2] Gain on a class action claim during the three and six months ended September 30, 2016.

[4] Non-GAAP provision for income taxes is calculated based on the effective tax rate for the non-GAAP adjustments. For comparative purposes, the non-GAAP provision for income taxes for the three and six months ended September 30, 2016 excludes the tax benefit of $0.1 million and $0.5 million, respectively, associated with adopting the stock-based compensation accounting standard.